Assume that Matt, Joe, and Teresa are the only citizens in a community. A proposed public good has a total cost of $1,000. All three citizens will share an equal portion of this cost in taxes. The benefit of the public good is $380 for Matt, $360 for Joe, and $200 for Teresa. In a majority vote, this proposal will most likely be

Question

Quizplus · Accepted Answer

The total benefit of the public good ($380 for Matt + $360 for Joe + $200 for Teresa = $940) is less than its cost ($1,000), making it economically inefficient. However, since Matt and Joe both receive more in benefits than they pay in taxes (each pays $333.33, and they receive $380 and $360, respectively), they are likely to vote for it, leading to its acceptance by a majority vote.

Assume That Matt, Joe, and Teresa Are the Only Citizens